Business

Since I wrote and published my first business article, the stock market and economy have gone through some massive changes. Throughout the year, I have written about inflation, supply and demand, and product distribution, which have all changed greatly since early October of last year. As my year of writing comes to a close, I thought it would be a good idea to discuss the future of the stock market, or at least what many investors predict.

In October, the stock market was doing better than it had during the long surges of COVID-19. It had stabilized, and investors felt that the market was starting to do better. This lasted for a few months as Covid didn’t slow, but people began to feel safer. Then, near the end of the year, supply chain issues started to build up. Fueled by a massive boom in holiday shopping and decreased workflows at dominant ports, ships were left at a standstill waiting for clearance to dock and unload. Many small businesses were hurt by this, unable to keep up with the sudden increase in demand for supply they didn’t yet have. These issues would continue to hurt businesses and cause national shortages of vital products like baby formula, as well as leisure items like toys and game consoles. After this, the newest Covid variant, Omicron, appeared but did not have a huge effect on the economy. People felt safer and had more reliance on the stock market, thus fueling it when it was expected to plummet (as it had at the beginning of Covid and during Delta’s appearance).

Continuing on, the stock market began to stabilize. Unfortunately, inflation kept full steam ahead, driving up the prices of commodities and essentials like food and car gas. The federal government did try numerous tactics to lower the rate of inflation, such as increasing interest rates, but has had little success as the market continues to plummet. Now, many believe that the US stock market is headed into a recession.

A recession is the overall downturn of the economy and stock market over more than a few months. Currently, the steady decline in the market - though occasionally rising - is fueled by out-of-control inflation, high-interest rates, and a crazy housing market. The US has experienced recessions before, such as the great recession from 2007 to 2009. The great recession was caused by multiple factors, most notably the collapse of the housing bubble.

Overall, the market is constantly changing. It is not only affected by disruptions in the system and unbalanced features of the economy, but also by the actions of people. Fear has a large influence on what investors do, which then affects how the stock market does. Changes to what businesses do and the choices they make also influence how that one company’s stock price does; Netflix is an example of decreasing stock prices because of show and movie changes, as well as policy changes. To conclude, the stock market and economy constantly change. This is uncontrollable. However, by understanding the influences and features of the stock market, we can analyze its occurrences and everyday changes, and make personal choices to benefit our investment portfolios and retirement accounts.

Thank you for taking time to read my articles throughout this school year. This is the last issue of my business column. If ever need be, please look back at these articles for information and advice. Thank you.

Throughout this series we have talked about features of the stock market and economy, the process of exchanging goods, and how to manage retirement funds. Now we have finally reached the part that most people are excited for when discussing investing: making money from investments.

Called your Return on Investment (ROI), this equation is a measure of the return you have made on your investment in the form of a percentage. The equation is set up like this: ROI = ((the current value of your investment - the cost of your investment) / the cost of your investment) x 100. (Image below). The numerator of the fraction is your net profit; your revenue minus your COGS (cost of goods sold), which in this case is whatever the investment form was, such as stocks, bonds, mutual funds, real estate, and more. This is considered a “good sold” because you are selling it to someone else and making or losing money from it. The cost of this is the price you paid when you bought the investment. This information on its own represents the majority of what you want to know when you make a sale. The rest of the equation transforms it into a percentage, which expresses your profit compared to your costs. Here’s an example: you buy 50,000 shares in the company Liam’s After Works Boxes for $50,000, which means that each share costs $1. After a year of growing its overall value, you sell this stock for $70,000, making a whopping $20,000 where each share is worth $1.40. This is your profit. When you divide this by $50,000 and multiply it by 100, you end up with 40%; this represents what percent more - or less - of your initial investment you made. A negative percentage represents loss.

There is one incredibly important thing to understand for any sort of investment: you haven’t made any money until you sell. Moreover, investments are constantly going up and down in value (causing the classically known graph pictured below) and can be estimated to be worth anything at a particular time. However, the only price that matters is the price at the time of sale. If you pay $5 for a share, it goes up to $100 in value, but you sell after it drops to $2, you have lost $3. Though it was once worth $100, you never owned that in cash and so only lost $3 (though you did lose the opportunity to make $95).

This principle can be applied to the stock market when we look at holding shares. If you buy a share and hold it for exactly one year, any fluctuation that happens during the year doesn’t matter. Your share may decrease or increase in value, but whatever the value is at the time of sale affects your cash wealth. Throughout any value change, you still have exactly one share. Using this principle, we can explain Warren Buffett’s famous strategy “buy low sell high”.

Let’s look at this more closely with an example. If you buy 1 share in Liam’s After Works Boxes for $5, wait 1 week, then sell the share for $10, you bought low and sold high; the share cost was less than when you sold it which made you a profit. Now let's say that you buy the share for $5, wait 1 week, and sell the share for $1 because you don’t want to lose more money. Here you have bought high and sold low, losing money.

A fun way to understand this is to select stock in a company and observe its value fluctuations for a few weeks, returning to the graphs to see when ideal times to sell may have been. Overall we see that it is both important to pick the right moment to buy and sell, determining any gains or losses. If you're investing for retirement, timing the dips of the stock market to a miniscule extent is unnecessary.

Who is Elon Musk? Elon Musk is known for the money he has and for creating the famous car company, Tesla. Tesla was founded in 2003 by a group of engineers, who wanted to help improve the environment by driving an electric car, instead of gasoline. Tesla believes that the faster the world stops relying on fossil fuels the world will be cleaner. There are many different opinions on Elon Musk. Lots of people question where all of his money goes. Back in November, Elon Musk donated $5.74 billion dollars. The donation happened just weeks after he dared the UN to show him its plan for solving world hunger. Where did this money go? What exactly did he tweet?

To summarize this tweet Mr. Musk stated that he wanted the World Food Program to give him a good reason in front of the public on why he should donate $6 billion dollars to solve world hunger. $6 billion is nearly all of the companies worth. But the document that said he donated the money, only told us that he had donated it to a charity. This donation also made Elon the second greatest doner last year, he was just behind Bill gates who donated $15 billion. But the question that remained was, where did this money go?

As Elon had said in the tweet if the World Food Program gave him a public reason on why he should donate the money and sell Tesla stock he would. Well, later in December a huge donation was made. At that time it wasn’t known where the money was donated because the recipient was anonymous. For clarification, the World Food Program did not say it would completely solve the problem, they said that the money could help over 42 million people who are in crisis. Some ways this money could be used are in this article from the World Food Program https://www.wfp.org/stories/wfps-plan-support-42-million-people-brink-famine, But another question that arose was, where did Elon Musk get this idea?

Just weeks before the tweet, a new CNN video had just come out. The stared David Beasley. David is an American Politician and the executive director of the World Food Program. The video was released on October 26, 2021. In the video, he said, “that the world’s elite needed to step up to end global food insecurity.” He specifically stated Elon Musk and Jeff Bezos’s names.

It is not yet clear how much, if any, of Musk's donations went directly to WFP, but the group is "excited" to hear he is engaged in the conversation, according to a recent Forbes article. https://www.forbes.com/sites/elizahaverstock/2022/02/15/elon-musk-reports-donating-57-billion-to-charity-but-there-is-no-trace-of-that-gift-yet/?sh=1091870c2782) Although Elon’s great donation will not end world hunger, it is a step in the right direction. It will help millions. As said earlier, Elon came in second for the greatest donation last year, just billions behind Bill Gates. This year he has said that he wants to go for more. He wants to donate “over $11 billion”. The new question is, where will he donate to?

Have you heard about how Microsoft plans to buy Activision Blizzard for 68.7 billion dollars? You may be wondering why Microsoft would buy Activision Blizzard. Well Phil Spencer, Microsoft's chief executive of gaming, said in a recent interview that the company's goal was to allow the new Activision Blizzard titles to “reach as many players as possible”.

Some games you might have heard of that were made by Activision Blizzard are Call of Duty, Crash Bandicoot, Guitar Hero, Skylanders, Overwatch, and Candy Crush Saga. and with these games, Phil Spencer said that Microsoft intends to “honor all existing agreements upon acquisition of Activision Blizzard and our desire to keep Call of Duty on PlayStation.” meaning Microsoft's new Activision games will not be exclusive to Xbox and PC so PlayStation players will most likely still be able to play Call of Duty. We are not completely sure about the other games I listed.

You may be wondering why Microsoft doesn't just shut all Playstation players out of Activision Blizzard's games? Microsoft is unable to do this due to contractual agreements. Meaning Activision said that they would keep Call of Duty multi-platform even with Microsoft owning Activision.

What does this mean for Xbox? Well, it means that Xbox will have ownership over globally-recognized franchises and they made a new division in Microsoft called Microsoft gaming run by Phil Spencer. With these new games, they hope to bring in more subscribers to the Xbox game pass. I don't think this is gonna be the last purchase of a gaming company by Microsoft. I'm sure they will continue to try to surpass Sony and become the most successful out of all other gaming companies.

What does this mean for Activision Blizzard? For Activision, this couldn't have come at a better time. “The company received many lawsuits based on numerous allegations of discrimination, sexual harassment, and toxic workplace culture at the company, There have been incidents ranging from drinking on the job to multiple instances of sexual harassment that have happened under the CEO of Activision Blizzard Bobby Kotick’s supervision.”-says Time Magazine. Kotic was aware of some of these allegations and was subpoenaed by the securities and exchange commission back in September of 2021.

There is no need to worry right now because this deal will happen in 2023 so this deal could change and Microsoft might decide not to or Activision could decide they don't want to go to Microsoft and go to Sony. But, this deal has not been solidified so until then all consoles and games will continue like normal.

For many adolescents and young adults, retirement is seen as a distant future full of relaxing days with no work - this is a common goal called a retirement plan. And while this is an achievable ideal, it is only made possible by the decisions and actions you make starting now. Mainly, how you manage your money. Retirement is defined as when you cease to work, meaning that your income from work is eliminated. However, bills, taxes, and living expenses remain, eating away at any money you may have saved in bank accounts with measly interest rates. Even with the addition of social security paychecks (more on this in a future article), people are often forced to downsize their lives to draw out the money they have; it’s all they have to live on until they die. Occasionally, this forces senior citizens to come out of retirement, end up homeless or in poverty, or become dependent on family. To combat these outcomes, retirement funds have been created as an outlet for better retirement saving.

There are multiple different types of funds to choose from. Some of the more common ones are 401(k)s, individual retirement accounts (IRAs), traditional IRAs, or Roth 401(k)s or IRAs; some are only available to certain income levels (also known as tax brackets), and each has unique benefits and conditions. For all retirement funds, money deposited is invested in the stock market in some way and - hopefully - grown over time. Based on your retirement plan, it is important to pick a fund that will achieve your goals. When picking a fund, there are multiple factors to consider; Tax-deferred vs. tax-exempt accounts and defined benefit vs. defined contribution accounts split up funds into different categories that narrow down the options.

Tax-deferred and tax-exempt accounts are two features of retirement funds that relate to when taxes are paid. Tax-deferred accounts include traditional IRAs and 401(k)s. When putting money into a tax deferred account, you get to remove that amount from your income for the year, getting a tax break on money you save up to a certain amount. Other than encouraging people to save now, no taxes on saved money means that more of your income is available to save, growing retirement savings faster. Taxing still occurs on this retirement money however. When money is withdrawn from the account, it is taxed based on the individual’s taxable income at the time of removal. However, by having less income when retired, tax rates are lower than paying up front.

The opposite of this, tax-exempt accounts such as Roth IRAs and Roth 401(k)s require taxes to be paid when money is deposited. By paying up front, the money has the chance to grow tax-free until removal, in which taxes are not paid. Oftentimes these types of accounts are the best for young, low earning students and workers who pay little taxes. By paying taxes now, it eliminates the question of what taxes will be like in the future.

A second category is defined-benefit vs. defined-contribution. These are differentiated by how the employer is involved. Defined-benefit accounts are also called pension plans. A pension is a retirement fund-like agreement that an employer makes with an employee, providing the employee with a set monthly payment at retirement age based upon the number of years worked at the company and salary. Because employees do not contribute any money into the fund, companies set aside money from profit, invest it, and then pay it out to the employee. Pension plans are commonly found in government jobs, but less common in jobs where people come and go quickly.

Compared to defined-benefit accounts, defined-contribution accounts put all the work on the individual. Commonly 401(k) plans, employee’s set aside some of their monthly salary which is invested into the account. Employers can choose to match up to a certain amount - set by themselves - of money an employee puts in. These accounts are tax-deferred accounts. An individual may possess multiple retirement accounts from previous jobs - called rollover accounts - and plans with current employers.

One of the main points in creating a retirement plan compared to just having savings accounts is that savings accounts often earn less than the rate of inflation, meaning that over time the purchasing power - the value - of the money decreases. By putting money into a retirement fund and investing it well, money you make keeps up with the effects of inflation, as well as increasing your savings. With this increase in savings you can invest even more money over and over, hopefully getting more money each time to continue investing more and growing a larger retirement fund balance over time. By starting saving as early as possible and making good choices along the way, your wealth will grow for your benefit and enjoyment later in life. Retirement funds may be slow to grow, but the hard work and patience put in now makes retirement even more leisurely; work hard now, relax more later.

Hello readers! This is my last business issue for the year 2021! I can’t wait to start a new year and set new goals. Today we will be learning about inflation. In the 1970’s and 1980’s, comic books were around 50 cents a piece. Nowadays, they are in the three to five dollar range. The cause of this is inflation. Inflation is an economic feature reflected in all types of economies, stemming from many different causes and contributes to slower economic growth. Inflation, in a basic form, is when monetary value decreases over an extended period of time. This is observed through increasing average prices over many required services to live comfortably, and is the opposite of deflation, in which monetary value increases over an extended period of time. Inflation is an overall percentage applied to an extended period to quantitatively assess the overall trend of it. A commonly accepted reason for base inflation is where money growth and production exceeds economic growth. Governments can, and often do control inflation to some extent. A global standard for inflation is 2%-3% per year.

Before we begin, we must also remember that money is a fiat currency. A fiat currency is the opposite of a representative currency. A representative currency, used widely in past centuries, is a physical currency substance that has significant monetary value. For example, gold and silver were common representative currencies all around the world. Now, most major currencies are fiat currencies, meaning that they are items with little monetary value such as paper and ink, yet have value because people decide it has worth, and are stable because the government and economy are stable. Fiat currencies make way for inflation as governments can create more when they want; unlike having to dig up more gold from the ground, a government can constantly print more money. Simply put, base monetary value is determined by the availability of the currency. Let's take a look at some details on inflation.

An economy naturally grows as more people join it through birth and imigration, and as the supply of goods and services increases. With money constantly being transferred throughout the system, there will be some amount of natural inflation, or the decrease of purchasing power for the same amount of money. Here’s an example: John gets money on his birthday, goes to an amusement park and pays an entrance fee of $20. The next year on his birthday, he gets the same amount of money, and goes to the same amusement park. This time though, the admission fee is $21. He can’t enter because he doesn’t have enough money. After 1 year, this amusement park’s admission fee has inflated 5% to $21. This is an example of both supply and demand and inflation. Looking at this single park on a microeconomics scale, we see that there are a few possibilities that may have led to the increase in price: increased demand for this park would have led to the park increasing their fee to meet the demand, or an increase in the costs to run the park, such as electricity bills and water bills. This second point is on a more macroeconomic scale, relating different services to the continually feeding cycle of inflation; when one service has to increase their prices, another service relying on them does too, creating a domino effect known as the Cantillon effect. The government, however, often gets involved in inflation by printing more money than the country’s value. By distributing this newly printed money through buying bonds, distributing money, or loaning it out to banks, the government increases the supply of money and decreases the value. A popularly known theory relating to this is Milton Friedman’s macroeconomic theory of monetarism; this theory states that directly controlling the printing rate of money can increase or decrease the inflation rate in the economy. The government’s involvement can be split up into multiple categories.

Demand-pull inflation is when more money circulating causes increased demand, therefore causing increased prices. With more money available, people spend more and create more demand for services. When the economy can’t match this demand increase, the prices of services increase to match. Say a person starts getting paid more because the company can obtain more money through loans because of an increase in money production. Now that person will go out and spend more. If this happens on a large scale, the demand for, say amusement park tickets, will rise, therefore increasing the admission prices. An amusement park cannot be constructed quickly, and so prices will rise to meet demand.

Cost-push inflation is when an increase of money in a certain market of the economy causes increases in prices for a certain good, which then causes prices to increase all throughout the product distribution channel, and eventually the end price for the consumer. Say a company sells sandwiches. If the overall price of meat rises, the prices of sandwiches will rise too.

Built-in inflation stems off of people expecting inflation to continue on a similar path in the future. They expect more money in their wages each year, and this increase in wages drives more spending which then drives higher costs. Higher costs also cause larger paychecks, and thus the cycle loops back and forth between these two pieces.

Let’s talk about how the US government manages inflation through its monetary policy. The government often uses differing amounts of interest rates for banks to control unemployment and demand, and therefore, inflation. Let’s break this down. First of all, the government aims to maintain a fairly steady inflation rate. Relatively similar rates from year to year provide businesses with information for future financial models, and help businesses maintain steady growth through keeping the economic patterns somewhat predictable. Keeping this in mind, the government can raise or lower interest rates for banks. One thing to remember about banks is that they are for-profit. They provide the services they do, but make profit off of them. And as do all businesses, banks need to borrow money sometimes. Oftentimes the places banks get money from is the government, through loans and bond selling. After borrowing from the government at a certain interest rate, banks then turn around and lend out some of that money to individuals for a higher interest rate. So, if the government raises the interest prices for banks, banks have to raise interest rates for businesses, and so businesses are impacted and thus can’t grow as expected, often leaving employees without jobs (unemployment). On the other hand, lowering interest rates means lower rates for banks, and therefore, large growth, thus increasing hiring and lowering unemployment. This is not the only thing that adjusting interest rates causes. By raising interest rates, loans for individuals are also affected. If people have to worry about, say, a 25% interest rate on their credit card balance, they will be really careful how they spend their money. If they have to pay more for a loan, people will be careful how they spend it. Combined with unemployment, people overall have less money to spend and will show decreased demand for products and services. Less demand means lower prices and thus less inflation. Oppositely, if interest rates are lower, people have more money to spend, unemployment is lower, and thus demand is driven up. This causes more inflation. This system follows the ideas of demand-pull inflation. More or less demand causes more or less inflation. But, there is not a situation in which there can be no unemployment and no inflation. Because of this, this system is used to balance out situations in which one or the other is extreme. But, is inflation all bad? Would it be better to have deflation?

Inflation can be viewed as both good and bad. Both high and low levels of inflation can negatively affect the economy. Too much inflation decreases the worth of people’s savings, and can cause the economy to slow. Too little can impact the growth of the economy as well. Another factor is what kind of money transfer or withholding an individual has. If an individual has tangible goods like stocks, the value of them slowly goes up with inflation; this is a good thing. On the other hand, the person buying stocks does not want to buy them at a higher price due to inflation; this is a bad thing. If someone has savings, they will not want high levels of inflation to deplete the value of their savings. But, if a person has a loan, their debt will shrink over time due to inflation. If people have physical items like cash, they will not like high levels of inflation because their cash decreases in value.

Given all of this information, we can understand that inflation is part of every economy, and can be seen as a good thing or a bad thing. The government often takes part in lowering or raising inflation, and people benefit or don’t from this manipulation. Going back to 50 cent comic books, we can see the first hand effects of inflation on one small part of a single market. Yet observing this and other data, we can see that inflation is relevant to everyone, no matter the market they are selling or buying in. And who knows. Maybe a childhood comic book series you plan to buy in the future will cost $20.

Thank you for reading my last article of 2021. I hope you enjoyed it. Please stay tuned for my next article in the series.

On October 28th, 2021, Facebook, Instagram, and WhatsApp, which are apps that allow you to connect with people, announced that they will be changing their name to Meta. A lot of people are wondering why the name was changed. Lots of people have suspicions, for example, hundreds of Facebook documents were leaked by former employee Frances Haugen. Others just say that Facebook wanted a better plan for the future.

What is Meta? Meta is an online 3D virtual space that a lot of companies are interested in as a future vision. Meta is also known as metaverse. Lots of people have had their heart set on Metaverse for years now. Facebook, Instagram, and WhatsApp will all still look the same, but they will simply just be owned by Meta and not the previous owner Mark Zuckerberg.

After Frances Haugen leaked these documents, Facebook is facing a lawsuit for federal security laws. They are being accused of failing to disclose its harm to young users. Specifically, they have been under attack for causing harm to teenage girls. For instance, Instagram has created a lot of body issues for young girls. One study by Facebook showed that more than 40 percent of those who were feeling “unattractive” shows that these feelings and emotions started by looking at Instagram.

Lawsuits like this are a big risk for Meta. There is still lots of hope for the metaverse. Meta has the type of potential to be the biggest business of all time. Some of their big plans are to “merge virtual life with real life.”

To sum up everything that has been stated so far, many brands have changed their name and been successful. Take Google for example. They went through a similar situation like this in 2015 when they changed their name to Alphabet. These apps are still their original names, they are just owned by different companies. Over all, Meta is predicted to have a good future ahead of them.

Prices have been increasing throughout this pandemic, but in October 2021 they hit a record high. On top of this Biden has created the Build Back Better bill, a bill that will allow two trillion dollars in major spending, increasing inflation even more.

President Biden’s gamble to spend a two trillion dollar bill to reshape the U.S economy won’t help us in the long run, and also won’t give sanctuary from the higher prices, no matter what the Democrats say.

This bill is called the Build Back Better plan and is a very contested spending bill, many Republicans are trying to stop the bill from passing through the senate. The bill passed through the house of representatives the morning of November nineteenth, but approval from the senate is a whole other story.

According to economists, there is little doubt that the massive tax stimulus helped create the 6.2% spike in prices throughout the U.S. Then the Trump and Biden administrations put about five trillion more dollars , during a period of one and a half years, causing the prices to go up even more. But the Build Back Better plan will have its money spread out over ten years. They say that doing this would limit the impact of inflation in the long run. “Most of this spending is going to kick in a couple of years down the road,” said chief economist Gus Faucher of PNC Financial Services.

The public is starting to worry about inflation. Many Republicans blame President Biden for the quickly increasing housing prices. They said that his plan would “further raise prices and hurt families that are already paying more for gas, food, rent, and many other things.” But the Democrats have said that the spending bill would ease price pressures in the long run, and the President’s Press Secretary has even accused the Republicans of favoring high inflation.

But inflation forecasters from the Wall Street Journal don’t believe what the Democrats are saying, they don’t see an impact on it one way or another. “It is not going to hurt inflation any more than we have already seen, but it is not going to provide any relief, either,” said chief economist Aneta Markowska of Jefferies Group.

The fate of the bill does not lie in the hands of economists, but senators and public perceptions. Joe Manchin of West Virginia, a Democrat, worries that another flood of federal spending will increase the fiscal shortage record and make inflation even higher.

The last major government stimulus in March might have been overkill, some economists say. The Biden administration had approved a 1.9 trillion dollar bill without Republican support that gave about fourteen-hundred dollars to each family and also included major spending. The reason for this stimulus was to help families because they didn’t know how the pandemic would end up. “It is easy in retrospect to say we should have had less stimulus. Hindsight is perfect,” Faucher said. “But the economy is probably much better off with the stimulus than it would have been without.”

What will have the biggest impact on inflation for the next few years? It’s not government Spending, but the ability of businesses to obtain the labor and supplies they need. The Build Back Better Bill doesn’t exactly target this problem, and that’s why many economists say it’s not a very good idea to spend this much.

Hello again, and welcome back to this series on finance. Today we will be learning about supply and demand. Simply put, the idea of supply and demand represents how much people are willing to buy a product, and how the price and production of the product are affected by this. They are the forces acting in an economy that determine prices, production rates, and demand for products. Later in this article, we will also be talking about the invisible hand. This is the idea to explain the self-balancing features of the system and of the free market. Supply and demand represent a major part in determining market behavior.

In 1776, Adam Smith wrote the first modern economics book, The Wealth of Nations. In it, he mentioned the idea of an invisible hand manipulating the prices and supply to achieve the ideal equilibrium, or point in which the price, demand, and supply are balanced. Let's take a look at supply and demand and some real world examples.

Demand is a point of view seen by consumers. Demand represents the willingness of consumers to buy a product based on the price. Generally, when a product is cheap, people are willing to buy more; the demand for the product increases when the price decreases. For example, a store sells canned beans. The store wants to conduct a study to determine what happens when they increase and decrease the prices of their canned beans. Their results are drastically different from each other. When they increase their prices to $10 a can, almost no people buy their beans, and there are cans left on the shelf. But when they lower their prices to $1 a can, everyone wants to buy their canned beans, and they don’t have enough to sell a can to everyone. When prices are high, people don’t want to buy the item; the demand for the product is low. But when prices are low, everyone wants to buy an item; the demand for the product is high.

Supply, on the other hand, is seen from the perspective of producers. It is driven by the goal of making the most money possible. When prices are high, producers are making a larger profit per sale than when prices are low. This incentivises producers to make more products, reaping the reward of high production and high profit. The bean store needs to sell their cans of beans for $1 each if they want to break even, meaning their costs equal $1 per can and they end up with no profit. The producer wants a profit of $1 dollar a can, and now sells a single can for $2. The producer now is making a profit of $1 dollar, and wants to maximize profit by increasing production. The producer was previously making 20 cans a day and selling for $1. When they increased the price to $2, they had an extra dollar to use to increase production. The producer now doubles their production to make 40 cans for $2. Essentially, the higher the price, the more a producer will produce to maximize profit.

Of course, these two goals oppose each other; consumers want prices low while producers want prices and production high. Obviously, the best price for a buyer would be free. But no one is going to sell a free product. On the flip side, producers can set any price they want for their product, say $1,000,000 per can of beans, but no one will buy their products if the price is unreasonable. This explains a previously mentioned fact about how consumers determine market price for a product. Producers can set a product at any price they want, but consumers will only pay the price they think is reasonable for the product. Going back to supply and demand, we can identify the balance point of supply and demand as equilibrium. Equilibrium is when the price of a good creates demand that matches production rates. More closely, when a price and amount of demand or production is in equilibrium, a producer makes a certain quantity of products and the consumers buy that amount. Back to our beans example, the bean store is selling 40 cans per day, $2 a can. People don’t find $2 unreasonably high, but not super cheap either, and only 40 people buy per day. At the end of the day, they are making 40 cans and selling 40 cans, ending up with no cans left. Production equals consumption. But what happens when the bean store increases or decreases their price?

When the bean store increases their price to $3 a can, they start to make more beans. Through building another factory, or hiring more employees, the bean store now produces 60 cans a day at $3 a can. But, people don’t want to pay $3 a can, and don’t buy beans from the bean store. If it is the only bean store in town, people may end up not eating beans as often. If there are other stores, they may shop there for cheaper prices. All together though, the prices and production went up, and the demand went down. This creates a surplus. Producers want to make more at the higher price, but consumers don’t want to buy at the higher price. Now, while the bean store is making $1 more per can sold, they are only selling 20 cans a day, and end up with 40 cans at the end of the day and a surplus.

Now let's say the bean store lowers their prices to $1 a can, and now only wants to make 20 cans a day. They lay off some workers, and put their factory to use in another department of the store making small, magnetic, tinfoil sculptures of Bernie Sanders’ head. But now people rejoice at the fact that cans of beans are so cheap and buy at an alarming rate to the company. Every day, the company is making 20 cans, but there is demand for 60 cans. Now there is a shortage of cans of beans. In both situations of surplus and shortage, the market price will eventually settle back to $2 a can, with 40 cans produced a day. At this equilibrium, the bean store can make the most money possible while still selling all of their delicious beans.

Sometimes when we get a shortage a new bean store will pop up in the market selling beans, let’s say the bean canteen. The bean store lowers their prices to $1 a can and decreases production to 20 cans a day to match profit levels, but there is a demand for 60 cans a day. Eventually, if the bean store doesn’t raise their prices and production, the bean canteen will say, “Look at all of these hungry customers. We have a factory! Let's put it into bean production”. The bean canteen is now making 40 cans a day and selling for $2. Once the bean store can’t supply any more cans of beans, people will have to resort to buying from the bean canteen at the higher price. The shortage created unmet demand, which in turn opened up space for another company to produce and sell the same product.

While the bean canteen is having a lot of fun selling beans, they notice that their sales dropped to 20 cans a day. There was demand for 40 cans a day from the bean canteen at the price of $1, but the bean canteen decided to sell their cans for $2. People who were previously excited to buy a can of beans but could’t purchase one from the bean store because of their supply shortage had to turn to the bean canteen. Seeing the higher prices, some customers decided they didn’t actually need beans, and left. Now the bean canteen downsizes to 20 cans a day and sells cans at $1.50 a can. After a while though, people start to want to buy beans just a little bit more because of the price drop. People initially go to the bean store because of the lower price. The bean store takes note of the increased demand, and accordingly raises their prices to $1.50 a can. The two stores now both sell a total of 40 cans a day at $1.50 a can. This phenomenon can also occur to balance outside pressures. If a celebrity writes an article about how everyone should eat beans, there will be a shortage of beans and the system will be thrown out of whack. Eventually, the production and prices will sort themselves out again. Maybe the celebrity then comes out and says that bananas are actually the cool new thing. The system will be thrown into chaos with a massive surplus of beans. Again, the system will eventually sort itself out. Keep in mind that all of these examples are basic and do not cover competitive costs. So, why does the system balance itself out? What theory have we created to explain this?

This is where the idea of the invisible hand comes back in. As we have seen, the supply and demand “scale” balances itself out whenever internal or external pressures are applied. We call it the invisible hand to symbolize the natural force of free trade that works to reach equilibrium in all market areas. In some countries though, the job of the invisible hand is seized by the government. In these countries, governments control market prices and production rates for many products. This not only makes products non-profitable or too expensive, but also starts food shortages. In the US, there is generally minimal interference, creating a very enjoyable free market with all sorts of products, prices, and businesses.

This subject may seem like a bland and confusing topic to learn about, but it is one of the most fundamental and important concepts of the free market and US economy. There is still so much for you, and even me, to learn about this mega topic. I encourage anyone interested to dig a little deeper, have conversations with your parents, and anything else that might get you thinking. After all, if Adam Smith can write a whole entire book about this topic and so many more related topics, this singular article is just the beginning.

As you walk into Target looking for the perfect gift, you turn into the gift aisles and look up and down, and the aisles look like they’re almost empty. Only a couple of items are left on the shelf, but nothing that you think will be right. You remember that you were looking for a snowglobe with a present inside, but as you look for snowglobes, you realize they’re all gone!

In 2020, the rapid spread of the novel coronavirus shut down industries worldwide. While we were in lockdown, there was a lower amount of consumer demand, and industrial activity slowed down. But, as the world slowly came out of lockdown, the demand for products skyrocketed and the supply chain is struggling to keep up with demand from consumers. This has led to chaos between manufacturers and the distribution of goods.

According to Tim Uy of Moody’s Analytics, the supply chain problems will only get worse. “As the global economic recovery continues to gather steam, what is increasingly apparent is how it will be stymied by supply-chain disruptions that are now showing up at every corner,” Uy said when he was interviewed on October 18th. He also said that “Border controls and mobility restrictions, unavailability of a global vaccine pass, and pent-up demand from being stuck at home have combined for a perfect storm where global production will be hampered because deliveries are not made in time, costs and prices will rise, and GDP growth worldwide will not be as robust as a result,”

Congestion and blockages in the supply chain are called “Supply chain bottlenecks,” and have affected the supply chain in a major way including a variety of sectors, services, and goods ranging from shortages of electronics and autos to food medicine and everyday items. As economies get back on their feet, the supply chain crisis has come to become one of the biggest challenges governments now face. COVID-weary citizens are eager to spend again but are finding goods either absent, or much more expensive. The issue is now looming large ahead of Christmas too, and last week, White House officials told Reuters that Americans could face higher prices and bleak shelves this festive season with the Biden administration trying to reduce blockages at ports.

Some items such as computer parts, toys, and other necessities such as non-expirable foods, like canned goods are all backed up off the ports, and if they aren’t, they are stuck with overland shipping problems.

In the world of trade, goods must be produced and distributed all over the world. To accomplish this, a chain is made, called a distribution channel, that moves products from production to the hands of buyers. To make this a little simpler to understand, a distribution channel in reverse is also known as a supply chain. While a supply chain is viewed from the eye of the company, showing them where they get their supplies, a distribution channel shows us the path goods travel to reach the consumer. There are three basic channels of distribution that most chains fit into. Each is made up of a consumer and producer, and may include a retailer and a wholesaler.

The first channel, also known as a direct channel, is very short. It consists of a producer and consumer. In this channel, a company makes their product, and then sells directly to the buyer. This creates a quick and cheap way to get products into the hands of the customers. The reason it is so cheap is because there are no middlemen making profit for themselves. Oftentimes, a company selling via a direct channel will be a local or small business, selling individual items. An example of this channel that you might encounter in your life is at a mall. Some stores and kiosks at a mall, such as self care stores selling soaps and lotions, make their own products and sell them. Have you ever bought an item from a direct channel? Answer in the google form below!

The next channel is a bit more complex. It is called a retail channel. It involves a producer, a consumer, and a retailer. A retailer is a company that sells items that they bought from other companies. A company makes a product, sells it to a retailer, and then the retailer sells it to the customer, usually along with lots of other assorted goods from other companies. This channel is the shortest indirect channel, meaning that a product travels through a middleman known as an intermediary. A good example of this is Amazon. Amazon buys from producers and sells to buyers. Just because a producer may sell to a retailer doesn’t mean that they only sell to retailers. It is very common for a company to sell to amazon, but also have a personal store. While direct channels are often online stores, retail channels are more common in brick and mortar stores, though they still occur on the internet. What stores have you bought from that you know are retailers? Answer in the google form below!

Finally, we have the wholesaler channel. This is the longest indirect channel. This channel involves a producer, a wholesaler, a retailer, and a consumer. A wholesaler is a company that buys large quantities of products from a producer and stores them. When a wholesaler turns around and sells them to retailers, retailers often buy in quantities larger than normal, but smaller than the wholesaler’s buying quantity. Buying large quantities of items is usually referred to as bulk buying. Producers are willing to accept a lower price per unit because they are selling in large quantities; Wholesalers are willing to buy in bulk, because with the reduced cost there is room to make a profit when they resell for more. This channel is most common in brick and mortar stores.

An example of a wholesaler channel is the channel of apples getting to your local store. A farmer produces the apples and sells to a wholesaler for $0.80 an apple, when they would have sold for $1.20 to a consumer. The wholesaler stores them in a warehouse until a retailer needs to put apples on the shelves. The wholesaler then sells some of the apples they bought for $1.00. The store now stocks their shelves with apples and sells them to consumers for $1.20 per apple. This is an example of the wholesaler channel. But, as you may have noticed, the price of the product at the start of the chain increased by $0.20 with each step. This is because each company in the channel needs to make some sort of profit.

Now you may be thinking, “Why are there all those middlemen that drive up the costs? Wouldn’t it be cheaper for everyone?”. The market works this way because it is very efficient. By having middlemen, we get lots of products in a single place. And by selling to a wholesaler once, the farmer doesn’t have to sell to customers at fifty different locations, driving up their costs. It is set up this way to get products out to consumers all over the place efficiently and cheaply. Let me know what stores you buy from that are in the wholesaler channel down below in the google form!

With all of this in mind, the path that products take to reach their users can be very complex and confusing to understand. But, understanding the flow of products helps us understand supply shortages and other issues such as worker shortages that cause stress within communities. Understanding the flow of products to consumers also helps us understand where we are getting the things we buy every day, and the companies we are supporting.

I hope you learned some new things reading this article! Stay tuned in two weeks for the next article. (Sneak peak: Supply and Demand) Remember: Check out the google form below!

Imagine yourself as a shopper in Costco; you’re struggling to get your cart through the crowded aisles. As you look over your shoulder, you see hands swiping at any possible item. Wipes, Toilet paper, hand sanitizer, they're all gone. For the first time, you see that Costco is running out of products.

This has happened before, a few years ago Costco had a shortage of antibacterial wipes, and other needed cleaning supplies. This is happening now because of panic purchasing, where consumers buy products out of sheer anxiety from the COVID-19 pandemic. According to Costco's Chief Financial Officer Richard Galanti "Now they've got plenty of merchandise, but there's two- or three-week delays on getting it delivered because there's a limit on short-term changes to trucking and delivery needs. So, it really is all over the board."

Galanti also said that “Costco has been adding suppliers and stockpiling some goods when possible.” The company also has chartered three container ships next year to transport goods from Asia to the U.S. and Canada. The shipments only represent 20% of Costco’s Asia shipping.

The new strain of the virus, the delta variant, isn’t helping at all as the demand for toiletries, like paper towels, toilet paper, and bottled water are constantly rising. Costco is also trying to keep the stock up on hand sanitizers and soap, but like many other companies, is failing. According to Costco’s administrative staff personnel, Costco is limiting purchasing of bulk toiletries, such as antibacterial wipes in order to keep up with rising demands.

When COVID-19 cases waned, Costco saw an increase in net sales because of increased comfort with the shoppers. This also led to their stock running low again, but not as low as it was from the early pandemic.

It’s not only in the stores, but Costco’s online shopping is also running low on stock, so they had to put a limit on its most popular toilet paper brands, such as Charmin, Kirkland, and Kleenex Cottonelle.

Welcome to this series on finances! In it, we will be discussing many topics including personal finances and the stock market. Every other week, a new issue will focus on a unique topic involving money and how it relates to you. Let’s get started with a simple overview of the stock market.

You may have heard the word economy before, such as in headlines or in discussions on the radio. Since the start of the COVID-19 pandemic, the economy has been a big focus of the public due to its fluctuations for the better or worse. Specifically speaking, an economy is the network of a nation’s resource production and consumption. In the US, the economy is considered a market-based economy, in which companies set their own prices based on what consumers are willing to pay and decide what they will produce. This is also known as supply and demand. The economy naturally balances itself, though the government does attempt to control different aspects of it such as unemployment and interest rates for banks.

You may have also heard the word stock market. Now, while the stock market and economy often follow the same long-term trends, it is important to understand that the stock market and the economy are completely separate aspects of the world of trade. The stock market is the market in which companies sell shares, or pieces of ownership in the company, to gain funding without taking out a loan. This is known as the primary market. The secondary market is the opportunity for individuals to buy and sell shares at self-determined prices to other buyers and sellers. By buying a share and waiting for it to increase in value to resell at the increased price, the seller gains profit. The buyer may also choose to wait and receive dividends if given, which are payouts by the company to shareholders. It is amazing how many companies are publicly selling shares. Some of your favorite companies may be selling shares. For example, Dutch Bros’ shares are selling at around $46.00. Starbucks shares are selling at around $112. Share which company you would buy a share from down below in the google form. It is important to note though that the price of a share does not determine the quality of product or company. Just because Google’s shares are more than Apple’s doesn’t necessarily mean that Google is better than Apple. The reason the stock market goes up and down in share value is not because the shares are intrinsically worth more; it is because people are willing to pay more or less for shares. The amount people are willing to pay is, however, determined by how a company performs or is expected to perform. The main trading outlets for the US stock market are the New York Stock Exchange, the Nasdaq, and the Chicago Board Options Exchange. Together, these make up the stock market trading system.

The reason all of this is important to you is because as an adult, your personal finances will be your responsibility. Making money is easy compared to managing and paying your bills, taxes, and living expenses, while simultaneously saving up money for a house or a car. It gets even more complicated when having kids. So, to help with managing your money, understanding personal investment opportunities to grow your savings, as well as retirement funds among other things, it is important to understand the stock market and economic principles. Understanding these aspects of the world early in your life, and most importantly applying knowledge where you can, will better your life later on, when money management is most important. Making money is the easy part. Saving money and managing it smartly is a lot harder.

⬇Take the poll down below!⬇

Hello Zoomers, welcome to Olivia’s Small Scale Investment Zone, where you, with your parents’ permission, will get to turn that 5 dollar bill that you earned into a whopping $5.60! This small scale topic is about none other than Bitcoin and other cryptocurrencies; But before you can get your profit of a handful of digital nickels, we have to go through a couple of pieces of information.

No, Bitcoin and cryptocurrencies are not the future of the economy. Think of an investment in crypto as an investment in a commodity rather than a stock. Most governments do not like the idea of cryptocurrency, and for good reasons they are high risk; a bit unstable and decentralized, meaning that instead of a national bank and mint issuing money, crypto is created by people “mining” it. Mining is how crypto transactions are processed. So as a reward for keeping crypto afloat, miners get some cryptocurrency. Due to its popularity, crypto that is bitcoin is called “Bitcoin” and crypto that is not is called “Altcoins”. Now time to get investing!

First some requirements:

• Permission from parents to make an account

• A non-school device with cell service or internet connection

• A crypto exchange (I use https://www.coinbase.com/ but I hear that robinhood and paypal also work)

• At minimum 2 dollars (I recommend 6.50 for coinbase)

• Being willing to lose any money that you invest (Crypto is high risk)

I recommend investing in Bitcoin, Ethereum, and Axie Infinity.